China's Factory Demand Good Sign for Economy

The HSBC Purchasing Managers Index for January is the latest sign of a rebound in China's economy. The WSJ's Aaron Back explains what is driving the recent turnaround.

This transcript has been automatically generated and may not be 100% accurate.

I ... the the ... is actually sector has accelerated to a two-year high for the month of January ... I'm Deborah con joining me now is reporter and back from Beijing ... Candace is the preliminary HSBC purchasing managers index ... which says that manufacturing is on the way of a good sign for the economy ... I guess there really a positive ... so it's a survey of manufacturers ... it is only a preliminary reading ... for she get a final reading in about a week's time ... but it's very often rose to two month high in January ... it shows that ... the Chinese economy coming off a strong fourth quarter last year ... still has all the momentum going into the new year ... I have to say I was that I was a bit surprised that the figures are still on the rise given the fact that ... can I mean just yesterday was speaking to add ... a manufacturers said he's starting to move up manufacturing outside of China because of the higher labor costs ... so ... what what how do you explain that time the higher figure ... well yet but I mean for small this survey just measures sort of month to month fluctuations ... in ... manufacturing activity is this just means that ... you know ... of many factions in January was a little bit stronger in December ... we're talking about is ... kind of a very long term trend has been putting out ... for the last year or so or ... you know actually the last few years ... which is that ... people who when gauging very well when manufacturing ... are starting to ship capacity to places like Vietnam and Indonesia ... so ... we're talking about ... a very short term trend this is a very long term trend ... in terms of that ... trade in the manufacturing sector ... I think what China has to hope ... is that as a will when manufacturing people making sneakers and things like that Forbes abroad ... that sort of high-end legal high tech manufacturing ... or you know things like services sector activity ... comes in to pick up the slack ... that's happening I don't think we can Mr. intelligence from one months to ... the family certainly seen in the semi reliance on external demands ... on on as strong as wedding use to the sale of our is the higher manufacturing and is is there a way to tell whether it's it's more due to domestic demand and versus external or ... in a lot of our are the bad numbers picking up with with external demand as well ... so if you look at this of ... in January the index ... they have a sub index for export orders ... which ticked up slightly ... of but wasn't as strong as the overall index ... so ... the takeaway is that ... you know exports are still not great ... and what is driving this turnaround manufacturing appears to be domestic ... and cake thanks Fran that's and back training us from Beijing ... for more ... for more news on the economy get it WS J dot com I'm Deborah con ...